Fed watchdog finds renovation failures, but no grounds for criminal referral

A Federal Reserve watchdog report released on Wednesday found no criminal wrongdoing by former chair Jerome Powell in the central bank's costly headquarters renovation, according to the report. The findings effectively clear Powell after the Justice Department launched a criminal investigation in January. The watchdog stated that there were no grounds to believe a federal criminal law violation occurred during the investigation.

However, the report criticized Fed management and oversight for contributing to the project's cost overruns, with construction costs ballooning to $2.5 billion from an initial $1.25 billion estimate. The report did not identify any administrative misconduct. The renovation had become a flashpoint in President Trump's campaign against Powell and the Fed, with Trump criticizing the project's escalating costs in July 2025.

The Justice Department's investigation centered on Powell's June 2025 congressional testimony about the renovation and its rising costs, which he denied. The watchdog noted that inflation alone could not explain the project's higher costs, with two major mechanical, electrical, and plumbing contracts more than tripling in cost. The design features criticized by Congress and other observers, such as marble, water features, and a garden terrace, did not significantly impact the cost increases.

Powell remained on the Fed's board after his chairmanship ended in May, as he wanted to see the investigation through to its conclusion.